i
EVALUATION OF THE NET AND GROSS ACCOUNTING
METHOD TO CALCULATE THE INCOME TAX PPH 21
IN PT. LEMATANG COAL LESTARI
(Case study)
THESIS
By
Tian Hongliang (Eirysaint)
008200800053
Presented to
The Faculty of Economic President University
In partial fulfillment of requirements
for
Bachelor Degree in Economics, Major in Accounting
President University
Cikarang Baru – Bekasi
Indonesia
Feb 2012
ii
PANEL OF EXAMINERS
APPROVAL SHEET
Herewith, the Panel of Examiners declare that the Thesis entitled “EVALUATION
OF THE NET AND GROSS ACCOUNTING METHOD TO CALCULATE
THE INCOME TAX PPH 21 IN PT. LEMATANG COAL LESTARI” submitted
by Tian Hongliang majoring in Auditing, Faculty of Economics was assessed and
proved to have passed the Oral Examination on (day and date of defense).
Chair, Panel of Examiner,
…………………………………..
Dr. Sumarno, SE, MBA, AK
Examiner 1
…………………………………...
Misbahul Munir, AK, MBA
Examiner 2
……………………………………
Nil Sonata, MH
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THESIS ADVISER
RECOMMENDATION LETTER
This Thesis entitled “EVALUATION OF THE NET AND GROSS
ACCOUNTING METHOD TO CALCULATE THE INCOME TAX PPH 21 IN
PT. LEMATANG COAL LESTARI” prepared and submitted by Tian Hongliang in
partial fulfillment of the requirements for Bachelor Degree in Economics - Major in
Management, has been reviewed and found to have satisfied the requirements for a
thesis fit to be examined. We therefore recommend this thesis for Oral Defense.
Cikarang, Indonesia, 18 January 2012
Acknowledge
Dr. Sumarno, SE, MBA, AK
Thesis Advisor,
Drs. Matias Zakaria, M. Si.,AK
iv
DECLARATION OF ORIGINALITY
This thesis entitled “EVALUATION OF THE NET AND GROSS
ACCOUNTING METHOD TO CALCULATE THE INCOME TAX PPH 21 IN
PT. LEMATANG COAL LESTARI” prepared and submitted by Tian Hongliang in
partial fulfillment of the requirements for Bachelor Degree in Economics Major in
Management has been reviewed and found to have satisfied the requirements for a
thesis fit to be examined. I therefore recommend this thesis for Oral Defense.
Cikarang, Indonesia, 13 January 2012
Researcher,
Tian Hongliang
008200800053
v
EVALUATION OF THE NET AND GROSS ACCOUNTING METHOD TO
CALCULATE THE INCOME TAX PPH 21 IN PT. LEMATANG COAL
LESTARI
Abstract
Tax is related to every business, every company need to concern about the
income tax whether it get profit or not. As long as the company paid to the employee,
the individual income tax must be concerned. In one company, usually there are two
kinds of income tax – employee income tax and company income tax. Regard to
individual income tax, there are two methods to calculate – gross method and net
method. The aid of this research is to find which method is more favorable for the
company to minimize the company's total individual income tax payment but still
according to the relevant Indonesia tax laws and Indonesia tax regulations.
The data related to the company’s income tax was collected by the researcher
directly from the accounting and finance department of the company with the
permission of the CFO, since the researcher is the one who deal with the tax affairs.
Then, the analysis of data gathered was conducted by the means of calculation,
assisted by the functions in Microsoft excel.
After the analysis of the data, the researcher find the mystery behind the gross
and net method. The finding was about in which cases the company should practice
the gross method, meanwhile, in which cases the company should practice the net
method. From the finds, the researcher has developed a new accounting system to
report the income tax which can save a lot of tax expenses every year for the company
with reasons other than tax fraud.
For the company, I suggest every employee should have the NPWP card. The
company uses gross method to calculate the employee income tax; means withholds
the employee income tax every month and report to tax office on time. Make the
journey entry properly and adjust the tax expense carefully in the end of the year.
Every carefully to deal with the tax, do not do anything related to tax fraud.
Key words: tax, income tax, net method, gross method, tax expense
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ACKNOWLEDGEMENT
Dear God, thank you for let me finish this thesis. May all things happen through
your kindness in every step I do and every word I use.
Now I have finished this thesis as one of the requirements to obtain a bachelor
degree in President University. All sweet and bad memories have glanced through my
mind in a second. I would like to express my gratitude to every people who have
supported me from the beginning to the end.
My special regards and thanks to Mr.Gunadi Gunawan (Gorge Lee), the
President of Panin Group, for his generous sponsor. He gives me the opportunity to
study in President University. I would like to send my countless thanks to my parents
for their love and encourage to me every time when I get disappointed.
My thanks to my friend Huang Junsong, with his help, we create the PPh21
calculate software.
My regards to all involved parties in President University:
- Mr. Misbahul Munir, as Activing Dean Faculty of Economics, who gave me a lot
of helps and encouraged me during my study.
- Mr. Sumarno Zain, as the Head of Accounting Study Program, who gave a lot of
helps and encouraged me during my study.
- Ms. Tuti, as the Secretary Staff of the Accounting Study Program, who helps me
with the information.
- Mr. Nil Sonata, my thesis advisor who gave me lots of insight and suggestions in
completing this thesis.
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- Mr.Faisal Abdullah, my first accounting lecture in President University, who led
me to enjoy the challenging and interesting Accounting.
- Ms. Mila Reyes、Mr. Ahalik、Mr. Choirul Awar and Mr.Umar Subandijo, my
accounting lectures at President University.
- All other lectures who have given me knowledge during my study at President
University.
My regards to all involved parties in PT. Lematang Coal Lestari that allowed
and supported me in doing the research and giving much suggestion during the
process.
- Mr. Jeffery, as the General Manager, who provided me the internship
opportunity.
- Mr. Gary, as the Accounting Manager, who gave me so many advices and
encouraged me during the internship.
- All the workmates in LCL who gave me support and help.
Thanks to all!
Cikarang, January 2012
Tian Hongliang
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TABLE OF CONTENTS
Outside title
Inside title……………………………………………………………… i
Panel of Examiners Approval Sheet…………………………………. ii
Thesis Adviser Recommendation Letter……………………………. iii
Declaration of Originality……………………………………………. iv
Abstract………………………………………………………………... v
Acknowledgement…………………………………………………….. vi
Table of Contents……………………………………………………… viii
List of Tables…………………………………………………………... ix
List of Figures………………………………………………………… xi
Chapter I: Introduction………………………………………………… 1
Chapter II: Literature Review………………………………………….. 7
Chapter III: Data Processing Method and Company’s Condition…………. 18
Chapter IV: Analysis and Evaluation……………………………………… 26
Chapter V: Conclusion and Recommendation……………………………… 52
References…………………………………………………………………… 54
Company’s Confirmation Letter …………………………..………………….. 56
Curriculum Vitae ……………………………………………………………. 57
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List of Tables
Table 1.1 Journal Entries to record the payment of salary and PPh21 by using net
method…………………………………………………………………….2
Table 1.2 The net calculation of PPh21 for the Indonesia general manager (TK)…. 3
Table 4.1 The sample payroll data……………………………………………...… 26
Table 4.2 Journal Entries to record the payment of salary and PPh21 by using net
method…………………………………………………………………... 27
Table 4.3 The net calculation of PPh21 for the Indonesia general manager (TK)….. 28
Table 4.4 Normal Tax Rate applicable to Individual Taxpayers…………………… 29
Table 4.5 Non-taxable incomes for Individual Taxpayers…………………………. 30
Table 4.6 The Gross method calculation of PPh 21 for the General Manager (TK).. 30
Table 4.7 Journal Entries to record the payment of salary and PPh21 by using gross
method…………………………………………………………………… 31
Table 4.8 The summary of PPh 21 calculation for the General Manager………… 31
Table 4.9 The Gross calculation of PPh21 for the accounting manager (K/1)……. 32
Table 4.10 The Net calculation of PPh21 for the accounting manager (K/1)…….. 33
Table 4.11 The summary of PPh21 calculation for Accounting Manager…………. 33
Table 4.12 The Gross calculation of PPh21 for the department manager (K/2)……. 34
Table 4.13 The Net calculation of PPh21 for the department manager (K/2)…….. 35
Table 4.14 The summary of PPh21 calculation for Department Manager……….. 35
Table 4.15 The Gross calculation of PPh21 for the Employee D (TK)………….. 36
x
Table 4.16 The Net calculation of PPh21 for the Employee D (TK)…………….. 37
Table 4.17 The summary of PPh21 calculation for Employee D……………....... 37
Table 4.18 The Gross calculation of PPh21 for the Employee E (K/1)…………. 38
Table 4.19 The Net calculation of PPh21 for the Employee E (K/1)……………. 39
Table 4.20 The summary of PPh21 calculation for Employee E………………… 39
Table 4.21 The Gross calculation of PPh21 for Employee F(K/0)………………… 40
Table 4.22 The Net calculation of PPh21 for the Employee F (K/0)……………… 41
Table 4.23 The summary of PPh21 calculation for Employee F…………………. 41
Table 4.24 The Gross calculation of PPh21 for the accountant (TK)……………. 42
Table 4.25 The Net calculation of PPh21 for the accountant (TK)……………….. 43
Table 4.26 The summary of PPh21 calculation for Accountant………………….. 43
Table 4.27 The Gross calculation of PPh21 for the Driver H (K/2)………………. 44
Table 4.28 The Net calculation of PPh21 for the Driver H (K/2)………………….. 45
Table 4.29 The summary of PPh21 calculation for Driver H……………………… 45
Table 4.30 The Gross calculation of PPh21 for the Driver I (K/3)……………….. 46
Table 4.31 The Net calculation of PPh21 for the Driver I (K/3)………………….. 47
Table 4.32 The summary of PPh21 calculation for the Driver H………………… 47
Table 4.33 The Gross calculation of PPh21 for the Security man (K/1)………… 48
Tab le 4.34 The Net calculation of PPh21 for the Security man (K/1)…………… 49
Table 4.35 The summary of PPh21 calculation for Security man…………………. 49
Table 4.36 The comparison of gross and net method in the current situation……… 51
xi
List of Figures
Figure 3-1The company organization structure……………………………………. 25
Figure 4-1The comparison of Gross and Net calculation of PPh21……………….. 50
1
CHAPTER I
INTRODUCTION
I.1. Background of the Study
Business is always related to tax; no matter what type the business is and no matter
whether the business is big or small. When the researcher has the internship in PT.
LEMATANG COAL LESTARI, the main job is to help the finance manager to deal
with the tax.
Since the company is a newly founded company in Indonesia, there is still no
production activity. As far as the company‘s operation, there are only three kinds of
taxes. Firstly, the rental tax which is defined in Pajak Penghasilan pasal 4 ayat (2) in
Indonesia Tax Law. Secondly, company income tax which is known as Pajak
Penghasilan pasal 25 in Indonesia. Last, the employee income tax which is known as
Pajak Penghasilan pasal 21 in Indonesia.
However, the rent tax is just calculated from the value of the transaction which is
the rent expense, it has nothing difficult. For the company income tax, there is no
production activity, there is no tax. Consequently, the company monthly income tax is
always zero until the researcher finished the internship. This is why the study is only
concern about the individual income tax payment in the company.
This study seeks to evaluate the gross method and net method to calculate the
income tax PPH21 in LCL. To find out which one is more favorable for the company.
2
I.2. Problem Identification and Statement
Now the company is using the net method to calculate employee income tax. For
example, the Indonesia general manager‘s monthly salary is Rp13,000,000; and no
marry, no dependant. In the end of the month, the general manager will take home
salary Rp 13,000,000. Usually in company, salary was payable on date 25 in each
month. Then, the salary will be paid in the end of each month. The employee income
tax was usually deposited to the bank which was appointed by the tax office and
reported to the tax office before date 10 in the following month.
Here is the journal under net method:
Table 1.1 Journal Entries to record the payment of salary and PPh21 by using net
method
Date Accounts Debit Credit
25 Feb, 2011 Salary Expense 13,000,000
Employee income tax expense 1,447,000
Salary Payable 13,000,000
Tax Payable-PPh21 1,447,000
To record the salary and tax
28 Feb, 2011 Salary Payable 13,000,000
Cash-Rp 13,000,000
To pay the salary
10 Mar, 2011 Tax Payable-PPh21 1,447,000
Cash-Rp 1,447,000
To deposit the income tax to the bank
Here is the form to calculate the employee income tax under net method:
3
Table 1.2 The net calculation of PPh21 for the Indonesia general manager (TK)
Item Month
annualize
Salary 13,000,000 12 156,000,000
Gross-up salary 14,742,000 12 176,904,000
PTKP 1,320,000 12 15,840,000
spouse - 12 -
dependant - 12 -
occupation 500,000 12 6,000,000
Jamsostek 295,000 12 3,540,000
pension 200,000 12 2,400,000
PKP 12,427,000 12 149,124,000
PPh21 1,447,000 12 17,364,000
Take home salary 13,000,000 12 156,000,000
There are two methods – gross and net to calculate the individual income tax
under the current Indonesia Income Tax Law. The different method will lead to
different amount of individual income tax payment for the company. The problem is
which method is more favorable for the company?
4
Statement of the Problem
The objective of this study is to find the way to minimize the employee individual
income tax payment of PT. Lematang Coal Lestari. However, the way still under the
current Indonesia Income Tax Law and the relevant regulation. So the problems will be:
Consider about the gross and net method to calculate the employee individual
income tax PPh 21, which method is the favorable method for the company in
current situation?
In order to solve these problems, the researcher must get enough payroll data
from the company and then do the comprehensive calculation and comparison to get the
conclusion. The payroll data should be different from the top management to the normal
staff whoever is subject to employee income tax.
I.3. Scope and Limitation of the Study
The scope of this study is limited only to the company‘s employee income tax in
Indonesia. It is bounded to be provided that the company is Indonesia taxpayer, and all
the employees are Indonesia taxpayers also without any income from offshore. It is only
the research on Indonesia income tax, not involved in the international taxation, so my
research is not applicable in other country‘s taxation, such as the shareholder in China.
In conducting this study, there are some limitations found. The study can not be
done in broader, due to the limitation of access to all employees‘ income data, from
both Indonesia source and offshore income, are not permitted to use due to the
confidentiality.
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I.4. Research Objectives
Research objectives are as following:
1. to analyze which accounting practice, the gross method or the net method which one
is more favorable for the company in current situation, and
2. to minimize the company‘s employee individual income tax payment legally.
I.5. Research Benefits
The benefits of the study are stated as follow:
1. To PT. Lematang Coal Lestari
With the research, the accounting & finance department of LCL can find a best
way for both the company and its employees to calculate, withhold, deposit and report
the individual income tax.
2. To President University Students
This research can be served as an additional guidance or reference in completing
similar research. And also, it gives additional insights about real case study that had
been done by the undergraduate.
3. To other organizations
For most of the companies, industries, schools, hospitals, and other organization
in Indonesia whichever has employment, they can get beneficial thinking from my
research.
I.6. Research Method
The research method in this thesis is also important to achieve the goals of this
research. In the research, the writer uses qualitative research approach with management
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consultant engagement. The research emphasizes on one comparing the gross and net
method in calculating employee income tax by choosing a small size of samples. The
writer believed that the results of the analysis will be effective and beneficial for the
company.
In this study, the researcher tried to evaluate the accounting practice for employee
individual income tax in the company. The process of evaluation is central to qualitative
research because the writer choose the small size of employee payroll sample to
calculate the amount of individual income tax under gross and net method. Then the
researcher makes form to compare the results to see which method is more favorable for
the company perspective.
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CHAPTER II
LITERATURE REVIEW
Realizing that monetary and economic crisis emerged in Indonesia from the middle
of 1997 were caused by huge number of foreign loan, the Indonesia government has
attempted to increase the revenue from tax sector. The increase is directed to achieve a
tax ratio, which regionally can be fairly accepted. Therefore, start from year 2000 till
now, the government and House of Representative (DPR) have amended several tax
laws. The amendments consist of Law on General Provisions and Tax Procedures,
Income Tax, Value Added Tax on Goods and Services and Sales Tax on Luxury Goods,
Acquisition Duty of Right on Land and Building, and Tax collection with Course
Warrants. Year 2008, the government and DPR had agreed to enact the new law on Tax
Court. These will be the primary literature that I used to provide the theoretical
grounding to the research.
II. 1 Book Keeping and Record
2.1.1 Legal Basis
1. Law No. 6 of 1983 re General Provisions and Tax procedures as Amended by the
Law No. 28 of 2007.
2. The Degree of Minister of Finance No. 533/KMK.04/2000, of 22 December 2000, re
Maintaining bookkeeping in a Currency other than Rupiah and Filing Annual tax
return.
3. The Degree of Minister of Finance No. 543/KMK.04/2000, of 22 December 2000, re
8
Using Foreign language in Bookkeeping and Recording.
4. The Degree of Director General of Taxes No.KEP-520/PJ/2000, of 4 December 2000,
re the Form and Procedures of Recording for Individual Taxpayer.
2.1.2 The Meaning of Bookkeeping
1. Bookkeeping is a process of orderly recording,
2. To collect financial data and information including assets, liabilities, equity, income
and expenses, and acquisition cost and sales price of goods or service.
3. Concluded with a financial statement in the form of a balance sheet and income
statement at the end of each Taxable Year.
(http://www.villagevolunteers.org/wp-content/uploads/2011/06/Basic-Bookkeeping.
pdf)
2.1.3 Basic Provisions on Bookkeeping
1. An individual Taxpayer who is engaged in business activities or independent personal
services and a corporate Taxpayer in Indonesia is obliged to keep book and records.
2. A Taxpayer exempted from the obligation on keep book on record but obliged to
keep record is an individual who is engaged in business activities or independent
personal services and who-according the provisions of the tax laws—is permitted to
calculate his net income by using the calculation norm and an individual Taxpayer who
is not engaged in business or independent personal services.
3. The bookkeeping or recording shall be conducted in Indonesia by using Latin
character, Arabic numeral, and Rupiah currency, and shall be written in Indonesia
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language or in a foreign language approved by the Minister of Finance.
4. The bookkeeping shall be maintained consistently in either accrual or cash basis.
5. The bookkeeping shall at least consist of records of assets, liabilities, equity, income
and expenses, as well as sales and purchases, so that the amounts of tax payable can be
calculated.
6. The recording as prescribed above shall consist of data collected regularly on gross
turnover or revenue and or gross income as the basis for calculating amounts f tax
payable, including income that is classified as non-taxable object and final taxable
income. (http://en.wikipedia.org/wiki/Bookkeeping)
7. Books, records, and documents upon which the bookkeeping or recording is based
and other documents shall be kept for 10 (ten) years in Indonesia, at the place of
business activities or residences (for individual taxpayers) or at the place of domiciles
(for corporate taxpayers).
8. A taxpayer exempted from the obligation to maintain bookkeeping and recording is
not required attaches balance sheet and income statement on his Annual Income Tax
Return.
9. What meant by foreign language is English (Referred to in the Decree of Minister of
Finance No.543/KMK.04/2000).
2.1.4 Recording
1. Recording shall be carried out by an individual taxpayer who is engaged in business
activities or independent personal services and it permitted to calculate his net
income by using the Calculation norm (article 14 of the Law no. 17/2000).
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2. Recording for one taxable year covering a period of 12 months starting on 1 January
to 31 December.
3. The recording shall prescribe the amount of gross turnover or revenue and or the
amount of gross income, as well as income that is classified as non-taxable object
and final taxable income, so that the amounts of tax payable can be calculated.
4. For a tax payer who has more than one business activity and place of business, the
recording shall describe the amount of gross turnover or revenue from each business
activity and place of business. (http://en.wikipedia.org/wiki/Recording)
II. 2 Tax Subject
Based on Article 2 paragraph (1) of Law No 7/1983 as last amended by Law No.
17/2000 on Income Tax (Income Tax Act-ITA), a tax subject consist of:
(a) an individual
(b) an undivided estate as a unit in lieu of the beneficiaries
(c) a body
(d) a permanent establishment
Tax subjects comprise both (a) resident and (b) non-resident Tax Subjects.
2.2.1 Resident Tax Subject
A Resident Tax Subject means:
1. An individual residing in Indonesia or presents in Indonesia for more than 183 days
in any 12 (twelve) month period, or an individual presents in Indonesia in a tax year
11
and intending to reside there in.
2. A company/corporate establish or domiciled in Indonesia.
3. An undivided estate as a unit in lieu of the beneficiaries.
A resident tax payer id subject to tax on income received or accrued in Indonesia
and outside Indonesia (worldwide income/global base/domiciliary base).
2.2.2 Non-Resident Tax Subject
A non-resident tax subject comprises:
1. An individual neither residing in Indonesia not present in Indonesia for more than
183 days in any 12 month period.
2. A body which is neither established nor domiciled in Indonesia.
That conducts business or carrying out activities through a permanent
establishment situated in Indonesia or that receives or accrues income from Indonesia
other than from conducting business or carrying our activities through a permanent
establishment in Indonesia.
A non-resident Taxpayer is subject to tax on income received or accrued in
Indonesia either through a permanent establishment in Indonesia or not (source base).
2.2.3 Permanent Establishment
A permanent establishment is a part of an enterprise operated by a Non-resident
tax subject. Based on Article 2 paragraph (5) of ITA, a permanent establishment is an:
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Establishment used by an individual not residing in Indonesia for not more than
183 days in any 12 month period, or by a body which is not established or domiciled in
Indonesia to carrying business or engage in activities in Indonesia.
It may take the form of:
1. a place of management
2. a branch office
3. a representative office
4. an office building
5. a factory
6. a workshop
7. a place of mining and extraction of natural resources, and drilling in territory used
for mining exploration
8. a fishery, place of animal husbandry, farm, plantation or forestry
9. a construction, installation or assembly project
10. the furnishing of services through employee or other personnel, if performed for
more than 60 (sixty) days within 12 (twelve) month period
11. an individual or a body acting as a dependent agent
12. an agent or employee of an insurance company not established or domiciled in
Indonesia that collects premiums or covers risk in Indonesia.
For the countries concluding Tax Treaties negotiation with Indonesia, this
definition of permanent establishment may somewhat be modified by the Treaties.
13
II. 3 Income Tax Object
According to Article 4(1) ITA, a tax object shall income, meaning:
1. Any increase in economic capability received or derived by a Taxpayer.
2. Originating from within or outside Indonesia.
3. May be used for consumption or to increase the wealth of the Taxpayer concerned.
4. In whatever name and from, including:
a) Compensation or other remuneration received or accrued in respect of
employment or service such as salary, wage, allowance, honorarium,
commission, bonus, gratuity, pension or other remuneration, except where
stipulated otherwise in the income tax law of Indonesia;
b) Lottery prizes or gifts in respect of employment or other activities and awards;
c) Business profit;
d) Gains from the sale or transfer property, including:
1) Gains from the transfer of property to a corporation, a partnership, and
other entities in exchange for shares or capital contribution;
2) Gains accrued by a corporation, a partnership, and other entities from the
transfer of property to shareholders, partners or members;
3) Gains form a liquidation, merger, consolidation, expansion, split up or
acquisition;
4) Gains from the transfer of property in the form of grant, aid or donation,
except when given to relatives within one degree of direct lineage, or to
religious, educational or other social entities or to small business including
cooperatives as determined by Minister of Finance, provided that two
14
parties do not have any business relation, ownership nor control;
e) Refunds of tax payments already deducted as expenses;
f) Interest, including premiums, discounts and compensation for loan repayment
guarantees;
g) Dividends, in whatever name and form, including dividend paid by an
insurance company to policyholders and the distribution of net income by a
cooperative;
h) Royalties;
i) Rents and other income from the use of property;
j) Annuities;
k) Gains from discharge of indebtedness, except up to a certain amount stipulated
by Government Regulation;
l) Gains from revaluation of assets;
m) Insurance premiums;
n) Contribution received or accrued by an association from its members who are
taxpayers engaged in business or independent services;
o) An increase in net wealth from income which has not been taxed.
II. 4 Gross Income Deduction
According to Article 6 ITA, the express that may be deducted from gross income
constitute:
1. Expense to earn, collect and secure income, namely costs directly related to business
activity of which the income constitutes tax subject. Therefore, the expense used to
15
earn, collect and secure income not subject to tax or subject to final tax may not be
deductible from the gross income.
2. Contribution paid to a pension fund that has approved by the Minister of Finance (as
gross income deduction in connection with the individual taxpayer‘s remuneration).
3. Loss arising from the sale or transfer of property owned and used to earn, collect
and secure income.
4. Expenditures for research and development conducted in Indonesia.
5. Expenditure for scholarship, apprenticeship and training, by considering fairness
and the company‘s interest.
6. Non-taxable income, particularly applied to any individual taxpayer, is granted as
follows:
1) Rp 15,840,000, for the individual taxpayer concerned;
2) An addition of Rp 1,320,000, for a married taxpayer;
3) An addition of Rp 15,840,000, for a married taxpayer whose wife‘s income is
consolidated with the husband‘s;
4) An addition of Rp 1,320,000, for each family member by blood or marriage in
direct lineage, including an adopted child, that is fully dependant, for a
maximum of three individuals;
5) Member of the family by blood or marriage in direct lineage includes parents,
parent-in-law, children, or adopted children;
6) Family members who are fully dependant meaning family members who have
no income and whose entire living expenses are borne by the Taxpayer;
7) An addition of occupational expense, 5% amount of gross income, maximum
16
Rp 500,000 per month, Rp 6,000,000 per year.
8) An addition f employee contribution to Jamsostek for old age security savings,
2% amount of gross income, full amount.
9) An addition of pension maintenance expense, 5% of gross income, maximum
Rp 200,000 per month, 2,400,000 per year.
10) Taxpayer‘s status may consist of:
TK/... = not married, added with the number of family dependants;
(TK/0, TK/1, TK/2, or TK/3)
K/... = married, added with the number of family dependants;
(K/0, K/1, K/2, or K/3)
K/I/... = married, an additional for a wife whose income is annexed with
her husband‘s, added with the number of family dependants;
(K/I/1, K/I/2, or K/I/3)
PH = married taxpayer who has made written agreement on separation of
wealth and income;
HB/... = married taxpayer who has lived separately, number with the
amount of family dependants;
(HB/0, HB/1, HB/2, HB/3)
The calculation of Non-Taxable Income above shall be determined according to
the status of the taxpayer at the beginning of a year or at the beginning of part of tax
year. For instance, on January 1, 2005, the non-taxable income of Taxpayer ‗A‘ is a
married and has 1 child. Even though of Taxpayer ‗A‘ for tax 2005 remain collect on
17
the bases of the marital status of K/1 = Rp 15,840,000 + 1,320,000 + 1,320,000 = Rp
18,480,000. (Further added by the occupational expense, Jamsostek contribution and
pension maintenance expense)
II. 5 Salary
A salary is a form of periodic payment from an employer to an employee, which
may be specified in an employment contract. It is contrasted with piece wages, where
each job, hour or other unit is paid separately, rather than on a periodic basis. From the
point of a business, salary can also be viewed as the cost of acquiring human resources
for running operations, and is then termed personnel expense or salary expense. In
accounting, salaries are recorded in payroll accounts.
2.5.1 Gross Salary
Gross pay is what you make before any deductions. If a job is advertized at
$30,000 a year, then that's the gross pay.
2.5.2 Net Salary
Net salary is the remaining amount after deductions from the gross salary, where
net means ultimate. Example deductions: income taxes, trade union dues, authorized
deduction for a retirement fund. Net salary, sometimes referred to as "take-home pay",
is the amount left over after deductions from the gross salary. So gross pay of $30,000
would become something likes net pay of $22,564.
18
CHAPTER III
METHOD OF DATA PROCESSING
AND COMPANY’S EXISTING CONDITION
III. 1 Data Collecting and Processing
3.1.1 Research Method
The research method in this thesis is also important to achieve the goals of this
research. In the research, the writer uses qualitative research approach with management
consultant engagement. The research emphasizes on one comparing the gross and net
method in calculating employee income tax by choosing a small size of samples. The
writer believed that the results of the analysis will be effective and beneficial for the
company.
In this study, the researcher tried to evaluate the accounting practice for employee
individual income tax in the company. The process of evaluation is central to qualitative
research because the writer choose the small size of employee payroll sample to
calculate the amount of individual income tax under gross and net method. Then the
researcher makes form to compare the results to see which method is more favorable for
the company perspective.
19
3.1.2 Research Instruments
Types of data
The type of data used in this research is the primary data and the secondary data;
which was collected from Jan 2011 until Mar 2011, and held in PT. Lematang Coal
Leatari which is located in Palembang, the province of Sumatra. According to Saunders
(2003) primary data is defined as new data that were collected specifically for research
purpose. On the other hand, the secondary data is defined as data that had already
collected for some other purpose beside the research purpose. Secondary data include
both raw data and published summaries.
1. Primary data
From the definition above, can be concluded that primary data is the data
collected in connection with the topic of the research, included history of the
company being studied, company‘s activities, payroll data, income tax data,
payroll documents, monthly tax return, and annual tax return, etc which were
specifically collected for this study purpose.
2. Secondary data
While the secondary data is the data that support the primary data, which
might be derived from any other literatures for the purpose of obtaining a
foundation basic and guidance in analyzing the data collected. The primary
usage of the secondary data is to document and obtain understanding of payroll
system, income tax, and the related accounting practice. The research also
20
looking for other data or materials used to support this thesis in library, such as
magazine, thesis, and also consult with the researcher‘s lectures, study from the
Indonesia Taxation, and etc.
Data collection
1. Field Research
The research was conducted by the writer by involving directly in the
company activities (especially in Accounting and Finance department) as the
object in this research. The methods of data collection are:
Observation (January 1, 2011 until March 31, 2011)
The writer collected the data by observing or monitoring directly to
the field. The observation is the systematic recording, description, analysis
and interpretation of people behavior.
Documentation
Documentation takes narrative form; the payroll form of all the
company‘s employees. It records all income tax matters in relation with the
employees‘ salaries. These documentations are required in order to obtain
and understand the payroll and tax payment information of the company.
Some examples of documentation are: payroll form, monthly SPT, and
annually SPT.
2. Library Research
The library research is conducted for the purpose of obtaining
secondary data which serve as the theoretical basic foundation for analyzing
the thesis‘s theme. In addition, library research also conducted for the purpose
21
of obtaining depth understanding about topic to support the analysis process.
3.1.3 Sampling Design
Size of the population
Since this research is done to examine the income tax for PT. Lematang Coal
Lestari, the population will be the salaries of all members, include the local and also the
foreign employee whether they are in senior manager, middle manager, or just
employee, in PT. Lematang Coal Lestari and also the taxable income of PT. Lematang
Coal Lestari.
Sampling technique applied
Since the population was very limited, only 105 (one hundred), in this study, in
order to make sure all kinds of data were involved in the sample, the purposive
sampling was used to obtain the sample. That means the researcher‘s sampling was very
purposive. The researcher selected the data which is unique and different with other,
means without duplication.
Actual computation of the sample
Since all sample are purposive selected and well organized, they are all actually
involved in the computation.
The actual sample size
The actual sample size is 10 (ten):
1. The General Manager, A
22
2. The Accounting Manager, B
3. One from the department managers, C
4. Three employees, D, E and F
5. One accounting staff, G
6. Two from drivers, H and I
7. One from security man, J
Which has covered all levels of employees in the company, and sufficient to
support the researcher‘s study.
3.1.4 Limitations
Since the writer is the accountant of the company, it is easier and convenient to
get the access to the data, and to get the permit of using the data even though it is highly
confidential. However, the writer still faced two problems:
Time Testing
According to Indonesia Tax law, the Indonesia taxpayer is an individual residing
in Indonesia or presents in Indonesia for more than 183 days in any 12 month period, or
an individual presents in Indonesia in a tax year and intend to reside there in. However,
the writer lack of access to the employee‘s Visa, Working Permit, KITAS and other
importer document, it is very difficult to use this time test. So the writer can only
assumed that they are all present residing in Indonesia, and has the intention to live in
Indonesia for more than 183 days.
23
Offshore Income
Another problem faced by the writer is the income source of General Manager,
Accounting Manager and other foreign employees who have offshore income. They
may have other income source which is very private and confidential, and unavailable to
get. The writer assumed they merely derive their income from Indonesia, without any
offshore income, due to the lack of information and distance factors.
24
III. 2 Company’s Existing Condition
3.2.1 Company Profile
PT. LEMATANG COAL LESTARI is young company which was founded in
September 2009 in Palembang, South Sumatra, Indonesia. It was invested by Chinese
people. The core business of LCL is to produce the coal.
The company has an open cut coal mine which is scheduled in production in July
2011 with an annual output of 2.3 million tons of coal. The company is a subsidiary
company of View Sino International Ltd. Actually the company is just a coal company
which only provides the coal to PT. GH EMM INDONESIA. While PT. GH EMM
INDONESIA is a power plant company which generates the power for Indonesia
Till the researcher leaved the company, it just has the pre-operational activities,
like making the legal foundation document, handling the foreign affairs, and also has
the construction activities, such as building the office and dormitory, construct the road
and strip the earth.
The company has about 150 employees. The researcher worked in Accounting &
Finance department, as the assistant of the finance manager. There are four people
including the researcher in the Accounting & Finance department. One is the finance
manager, one is cashier, and the other one is accountant and the researcher. The
researcher main job is deal with the taxes.
25
3.2.2 Organization Structure
Figure 3-1 The company organization structure
3.2.3 Current Tax Situation
In the company exists three foreign employee, one is the general manager, one is
the accounting manager and the researcher itself. All of these employees already stay in
Indonesia more than 183 days, so they are tax residents.
The closing date of operation is date 25 of each month. We calculate the salary
from date 25 to next date 25. And we pay the salary to employee in the end of each
month. We calculate PPh 21 by using net accounting method, so the company do not
withhold the tax from employee, the company will pay all the taxes.
26
CHAPTER IV
ANALYSIS AND EVALUATION
The data the researcher gathered are as follow
Table 4.1 The sample payroll data
No. Name Position Salary Status
1 A General Manager Rp 13,000,000 TK
2 B Accounting Manager Rp 10,000,000 K/1
3 C Department Manager Rp 8,000,000 K/2
4 D Employee Rp 5,000,000 TK
5 E Employee Rp 5,000,000 K/1
6 F Employee Rp 4,000,000 K/0
7 G Accountant Rp 6,000,000 TK
8 H Driver Rp 2,000,000 K/2
9 I Driver Rp 2,000,000 K/3
10 J Security Man Rp 1,500,000 K/1
27
IV.1 General Manager (A)
The Indonesia general manager‘s monthly salary is Rp13, 000,000; and no
marries, no dependant. Usually in LCL, salary was payable on date 25 in each month.
So, the researcher makes the following journal entry:
Here is the journal under net method:
Table 4.2 Journal Entries to record the payment of salary and PPh21 by using net
method
Date Accounts Debit Credit
25 Feb, 2011 Salary Expense 13,000,000
Employee income tax expense 1,447,000
Salary Payable 13,000,000
Tax Payable-PPh21 1,447,000
To record the salary and tax
28 Feb, 2011 Salary Payable 13,000,000
Cash-Rp 13,000,000
To pay the salary
10 Mar, 2011 Tax Payable-PPh21 1,447,000
Cash-Rp 1,447,000
To deposit the income tax to the
bank
28
Here is the form to calculate the employee income tax under net method:
Table 4.3 The net calculation of PPh21 for the Indonesia general manager (TK)
Item month annualize
Salary 13,000,000 12 156,000,000
Gross-up salary 14,742,000 12 176,904,000
PTKP 1,320,000 12 15,840,000
spouse - 12 -
dependant - 12 -
occupation 500,000 12 6,000,000
Jamsostek 295,000 12 3,540,000
pension 200,000 12 2,400,000
PKP 12,427,000 12 149,124,000
PPh21 1,447,000 12 17,364,000
Take home salary 13,000,000 12 156,000,000
As we can see from the table, the Indonesia general manager individual income
tax PPh 21 is Rp 1,447,000, take home salary is Rp 13,000,000.
I use the software‖JST-PPH21‖ to calculate this tax. This software is made by me
and my friend; I tell him how to calculate the PPh21 and the process to calculate it. We
cost one month to finish this software. In this software we use two important forms
which relate to the PPh21.
29
Most income earned by individual tax residents is subject to income tax at the
following normal tax rates:
Table 4.4 Normal Tax Rate applicable to Individual Taxpayers
Taxable Income Rate Tax Rp.
On the first Rp 50,000,000 5% 2,500,000
On the next Rp 200,000,000 15% 30,000,000
On the next Rp 250,000,000 25% 62,500,000
On the next amount of over Rp 500,000,000 30% 30% of the relevant amount
Annual non-taxable incomes (PTKP) for resident individuals are as follows:
Table 4.5 Non-taxable incomes for Individual Taxpayers
Rp.
Taxpayer 15,840,000
Spouse 1,320,000
Each dependant (max. of 3) 1,320,000
Occupational expense (5% of gross income, max. Rp 500,000/month) 6,000,000
Employee contribution to Jamsostek for old age security savings (2% of
gross income)
Full amount
Pension maintenance expense (5% of gross income max. Rp
200,000/month)
2,400,000
30
If we consider the salary of Rp 13,000,000 as net, the Tunjangan Pajak (PPh21)
will be consider as fringe benefit, it is a part of the salary, consequently, the Tax Base
will not be Rp 13,000,000 anymore. The Tax Base is the net salary plus the Tunjangan
Pajak. Then I use the software ―JST-PPH21‖ to calculate the tax.
In order to know the individual income tax under gross method, I calculate as
below:
Table 4.6 The Gross method calculation of PPh 21 for the General Manager (TK)
Item month
annualize
salary 13,000,000 12 156,000,000
PTKP 1,320,000 12 15,840,000
spouse - 12 -
dependant - 12 -
occupation 500,000 12 6,000,000
Jamsostek 260,000 12 3,120,000
pension 200,000 12 2,400,000
PKP 10,720,000 12 128,640,000
PPh21 1,191,000 12 14,292,000
Take home salary 11,809,000 12 141,708,000
31
So the journal entries will be like these:
Table 4.7 Journal Entries to record the payment of salary and PPh21 by using
gross method
Date Accounts Debit Credit
25 Feb, 2011 Salary Expense 13,000,000
Salary Payable 11,809,000
Tax Payable 1,191,000
To record the salary expense
28 Feb, 2011 Salary Payable 11,809,000
Cash-Rp 11,809,000
To pay the monthly salary
10 Mar, 2011 Salary Payable 1,191,000
Cash-Rp 1,191,000
To pay the general manager‘s PPh21
So we can summarize as following:
Table 4.8 The summary of PPh 21 calculation for the General Manager
13,000,000 TK Take home Gross-Up salary PPh21
Gross 11,809,000 13,000,000 1,191,000
Net 13,000,000 14,742,000 1,447,000
So the gross method will be pay less individual income tax (PPh21) provided that
the monthly salary is Rp 13,000,000 and the status is TK.
How about other samples? The researcher will exam one by one.
32
IV.2 Accounting Manager (B)
For B, the accounting manager, his monthly salary is 10,000,000, and the status is
K/1 (married, one dependant). We use the same software to calculate the PPh21 under
gross method; the result will be as followed:
Table 4.9 The Gross calculation of PPh21 for the accounting manager (K/1)
Item month
annualize
salary 10,000,000 12 120,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 110,000 12 1,320,000
occupation 500,000 12 6,000,000
Jamsostek 200,000 12 2,400,000
pension 200,000 12 2,400,000
PKP 7,560,000 12 90,720,000
PPh21 717,333 12 8,607,996
Take home salary 9,282,667 12 111,392,094
33
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.10 The Net calculation of PPh21 for the accounting manager (K/1)
Item month
annualize
Salary 10,000,000 12 120,000,000
Gross-up Salary 10,840,953 12 130,091,436
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 110,000 12 1,320,000
occupation 500,000 12 6,000,000
Jamsostek 216,819 12 2,601,829
pension 200,000 12 2,400,000
PKP 8,384,134 12 100,609,607
PPh21 840,953 12 10,091,436
Take home salary 10,000,000 12 120,000,000
Here is the summary for K/1, monthly income Rp 10,000,000
Table 4.11 The summary of PPh21 calculation for Accounting Manager
10,000,000 K/1 Take home Gross-Up salary PPh21
Gross 9,282,667 10,000,000 717,333
Net 10,000,000 10,840,953 840,953
Obviously, the gross method will pay less individual income tax (PPh21)
provided that the monthly salary is Rp 10,000,000 and the status is K/1.
34
IV.3 Department Manager (C)
For C, the department manager, his monthly salary is 8,000,000, and the status is
K/2 (married, two dependants). We use the same software to calculate the PPh21 under
gross method; the result will be as followed:
Table 4.12 The Gross calculation of PPh21 for the department manager (K/2)
Item month
annualize
salary 8,000,000 12 96,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 220,000 12 2,640,000
occupation 400,000 12 4,800,000
Jamsostek 160,000 12 1,920,000
pension 200,000 12 2,400,000
PKP 5,590,000 12 67,080,000
PPh21 421,833 12 5,061,996
Take home salary 7,578,167 12 90,938,004
35
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.13 The Net calculation of PPh21 for the department manager (K/2)
Item month
annualize
Salary 8,000,000 12 96,000,000
Gross-up salary 8,490,218 12 101,882,616
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 220,000 12 2,640,000
occupation 500,000 12 6,000,000
Jamsostek 169,804 12 2,037,652
pension 200,000 12 2,400,000
PKP 5,970,414 12 71,644,964
PPh21 490,218 12 5,882,616
Take home salary 8,000,000 12 96,000,000
Here is the summary for K/2, monthly income Rp 8,000,000
Table 4.14 The summary of PPh21 calculation for Department Manager
8,000,000 K/2 Take home Gross-Up salary PPh21
Gross 7,578,167 8,000,000 421,833
Net 8,000,000 8,490,218 490,218
Obviously, the gross method will pay less individual income tax (PPh21)
provided that the monthly salary is Rp 8,000,000 and the status is K/2.
36
IV.4 Employee (D)
For D, the employee, his monthly salary is 5,000,000, and the status is TK (no
spouse, no dependant). We use the same software to calculate the PPh21 under gross
method; the result will be as followed:
Table 4.15 The Gross calculation of PPh21 for the Employee D (TK)
Item month
annualize
salary 5,000,000 12 60,000,000
PTKP 1,320,000 12 15,840,000
spouse - 12 -
dependant - 12 -
occupation 250,000 12 3,000,000
Jamsostek 100,000 12 1,200,000
pension 200,000 12 2,400,000
PKP 3,130,000 12 37,560,000
PPh21 156,500 12 1,878,000
Take home salary 4,843,500 12 58,122,000
37
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.16 The Net calculation of PPh21 for the Employee D (TK)
Item month
annualize
Salary 5,000,000 12 60,000,000
Gross-up salary 5,164,312 12 61,971,744
PTKP 1,320,000 12 15,840,000
spouse - 12 -
dependant - 12 -
occupation 258,206 12 3,098,472
Jamsostek 103,286 12 1,239,435
pension 200,000 12 2,400,000
PKP 3,282,820 12 39,393,837
PPh21 164,132 12 1,969,584
Take home salary 5,000,000 12 60,000,000
Here is the summary for TK, monthly income Rp 5,000,000
Table 4.17 The summary of PPh21 calculation for Employee D
5,000,000 TK Take home Gross-Up salary PPh21
Gross 4,843,500 5,000,000 156,500
Net 5,000,000 5,164,312 164,132
Obviously, the gross method will pay less individual income tax (PPh21)
provided that the monthly salary is Rp 5,000,000 and the status is Tk.
38
IV.5 Employee (E)
For E, the employee, his monthly salary is 5,000,000, and the status is K/1
(married, one dependant). We use the same software to calculate the PPh21 under gross
method; the result will be as followed:
Table 4.18 The Gross calculation of PPh21 for the Employee E (K/1)
Item month
annualize
salary 5,000,000 12 60,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 110,000 12 1,320,000
occupation 250,000 12 3,000,000
Jamsostek 100,000 12 1,200,000
pension 200,000 12 2,400,000
PKP 2,910,000 12 34,920,000
PPh21 145,500 12 1,746,000
Take home salary 4,854,500 12 58,254,000
39
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.19 The Net calculation of PPh21 for the Employee E (K/1)
Item month
annualize
Salary 5,000,000 12 60,000,000
Gross-up salary 5,152,595 12 61,831,140
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 110,000 12 1,320,000
occupation 257,629 12 3,091,548
Jamsostek 103,052 12 1,236,623
pension 200,000 12 2,400,000
PKP 3,051,914 12 36,622,969
PPh21 152,595 12 1,831,140
Take home salary 5,000,000 12 60,000,000
Here is the summary for K/1, monthly income Rp 5,000,000
Table 4.20 The summary of PPh21 calculation for Employee E
5,000,000 K/1 Take home Gross-Up salary PPh21
Gross 4,854,500 5,000,000 145,500
Net 5,000,000 5,152,595 152,595
Obviously, the gross method will pay less individual income tax (PPh21)
provided that the monthly salary is Rp 5,000,000 and the status is K/1.
40
IV.6 Employee (F)
For F, the employee, his monthly salary is 4,000,000, and the status is K/0
(married, no dependants). We use the same software to calculate the PPh21 under gross
method; the result will be as followed:
Table 4.21 The Gross calculation of PPh21 for Employee F(K/0)
Item month
annualize
salary 4,000,000 12 48,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant - 12 -
occupation 200,000 12 2,400,000
Jamsostek 80,000 12 960,000
pension 200,000 12 2,400,000
PKP 2,090,000 12 25,080,000
PPh21 104,500 12 1,254,000
Take home salary 3,895,500 12 46,746,000
41
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.22 The Net calculation of PPh21 for the Employee F (K/0)
Item month
annualize
salary 4,000,000 12 48,000,000
Gross-up salary 4,109,596 12 49,315,152
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant - 12 -
occupation 205,478 12 2,465,736
Jamsostek 82,192 12 986,303
pension 200,000 12 2,400,000
PKP 2,191,926 12 26,303,113
PPh21 109,596 12 1,315,152
Take home salary 4,000,000 12 48,000,000
Here is the summary for K/0, monthly income Rp 5,000,000
Table 4.23 The summary of PPh21 calculation for Employee F
4,000,000 K/0 Take home Gross-Up salary PPh21
Gross 3,895,500 4,000,000 104,500
Net 4,000,000 4,109,596 109,596
Obviously, the gross method will pay less individual income tax (PPh21)
provided that the monthly salary is Rp 5,000,000 and the status is K/0.
42
IV.7 Accountant (G)
For G, the accountant, his monthly salary is 8,000,000, and the status is TK (no
spouse, no dependant). We use the same software to calculate the PPh21 under gross
method; the result will be as followed:
Table 4.24 The Gross calculation of PPh21 for the accountant (TK)
Item month
annualize
salary 6,000,000 12 72,000,000
PTKP 1,320,000 12 15,840,000
spouse - 12 -
dependant - 12 -
occupation 300,000 12 3,600,000
Jamsostek 120,000 12 1,440,000
pension 200,000 12 2,400,000
PKP 4,060,000 12 48,720,000
PPh21 203,000 12 2,436,000
Take home salary 5,797,000 12 69,564,000
43
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.25 The Net calculation of PPh21 for the accountant (TK)
Item month
annualize
salary 6,000,000 12 72,000,000
Gross-up salary 6,223,513 12 74,682,156
PTKP 1,320,000 12 15,840,000
spouse - 12 -
dependant - 12 -
occupation 311,175 12 3,734,100
Jamsostek 124,470 12 1,493,643
pension 200,000 12 2,400,000
PKP 4,267,868 12 51,214,413
PPh21 223,513 12 2,682,156
Take home salary 6,000,000 12 72,000,000
Here is the summary for TK, monthly income Rp 6,000,000
Table 4.26 The summary of PPh21 calculation for Accountant
6,000,000 TK Take home Gross-Up salary PPh21
Gross 5,797,000 6,000,000 203,000
Net 6,000,000 6,223,513 223,513
Obviously, the gross method will pay less individual income tax (PPh21)
provided that the monthly salary is Rp 6,000,000 and the status is TK.
44
IV.8 Driver (H)
For H, the Driver, his monthly salary is 2,000,000, and the status is K/2 (married,
two dependants). We use the same software to calculate the PPh21 under gross method;
the result will be as followed:
Table 4.27 The Gross calculation of PPh21 for the Driver H (K/2)
Item month
annualize
salary 2,000,000 12 24,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 220,000 12 2,640,000
occupation 100,000 12 1,200,000
Jamsostek 40,000 12 480,000
pension 100,000 12 1,200,000
PKP 110,000 12 1,320,000
PPh21 5,500 12 66,000
Take home salary 1,994,500 12 23,934,000
45
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.28 The Net calculation of PPh21 for the Driver H (K/2)
Item month
annualize
salary 2,000,000 12 24,000,000
Gross-up salary 2,005,753 12 24,069,036
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 220,000 12 2,640,000
occupation 100,287 12 1,203,444
Jamsostek 40,115 12 481,381
pension 100,287 12 1,203,444
PKP 115,064 12 1,380,767
PPh21 5,753 12 69,036
Take home salary 2,000,000 12 24,000,000
Here is the summary for K/2, monthly income Rp 2,000,000
Table 4.29 The summary of PPh21 calculation for Driver H
2,000,000 K/2 Take home Gross-Up salary PPh21
Gross 1,994,500 2,000,000 5,500
Net 2,000,000 2,005,753 5,753
Obviously, the gross method will pay less individual income tax (PPh21)
provided that the monthly salary is Rp 2,000,000 and the status is K/2.
46
IV.9 Driver (I)
For I, the driver, his monthly salary is 2,000,000, and the status is K/3 (married,
three dependants). We use the same software to calculate the PPh21 under gross method;
the result will be as followed:
Table 4.30 The Gross calculation of PPh21 for the Driver I (K/3)
Item month
annualize
salary 2,000,000 12 24,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 330,000 12 3,960,000
occupation 100,000 12 1,200,000
Jamsostek 40,000 12 480,000
pension 100,000 12 1,200,000
PKP - 12 -
PPh21 - 12 -
Take home salary 2,000,000 12 24,000,000
47
If we calculate the PPh21 under the net method, the result will be as followed:
Table 4.31 The Net calculation of PPh21 for the Driver I (K/3)
Item month
annualize
salary 2,000,000 12 24,000,000
Gross-up salary 2,000,000 12 24,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 330,000 12 3,960,000
occupation 100,000 12 1,200,000
Jamsostek 40,000 12 480,000
pension 100,000 12 1,200,000
PKP - 12 -
PPh21 - 12 -
Take home salary 2,000,000 12 24,000,000
Here is the summary for K/3, monthly income Rp 2,000,000
Table 4.32 The summary of PPh21 calculation for the Driver H
2,000,000 K/3 Take home Gross-Up salary PPh21
Gross 2,000,000 2,000,000 0
Net 2,000,000 2,000,000 0
Obviously, there is no individual income tax (PPh21) provided that the monthly
salary is Rp 2,000,000 and the status is K/3.
48
IV.10 Security man (J)
For J, the department security man, his monthly salary is 1,500,000, and the status
is K/1 (married, one dependant). We use the same software to calculate the PPh21 under
gross method; the result will be as followed:
Table 4.33 The Gross calculation of PPh21 for the Security man (K/1)
Item month
annualize
Take home 1,500,000 12 18,000,000
salary 1,500,000 12 18,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 110,000 12 1,320,000
occupation 75,000 12 900,000
Jamsostek 30,000 12 360,000
pension 75,000 12 900,000
PKP - 12 -
PPh21 - 12 -
49
If we calculate the PPh21 under the net method, the result will be as followed:
Tab le 4.34 The Net calculation of PPh21 for the Security man (K/1)
item month
annualize
Take home 1,500,000 12 18,000,000
salary 1,500,000 12 18,000,000
PTKP 1,320,000 12 15,840,000
spouse 110,000 12 1,320,000
dependant 110,000 12 1,320,000
occupation 75,000 12 900,000
Jamsostek 30,000 12 360,000
pension 75,000 12 900,000
PKP - 12 -
PPh21 - 12 -
Here is the summary for K/1, monthly income Rp 1,500,000
Table 4.35 The summary of PPh21 calculation for Security man
1,500,000 K/1 Take home Gross-Up salary PPh21
Gross 1,500,000 1,500,000 0
Net 1,500,000 1,500,000 0
Obviously, there is no individual income tax (PPh21) provided that the monthly
salary is Rp 1,500,000 and the status is K/1.
50
So we can summarize as following:
Figure 4-1The comparison of Gross and Net calculation of PPh21
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
gross
net
As so far, we can conclude that the gross method always pay less employee
individual income tax. Only if there is no individual tax, using gross or net method does
not matter again.
Monthly salary
PPh 21
51
Table 4.36 The comparison of gross and net method in the current situation
Position Monthly Salary Status
Annual salary payment to
employees Annual employee individual
Income Tax
Referred to
table gross method net method gross method net method
General Manager 13,000,000 TK 141,708,000 156,000,000 14,292,000 16,759,668 4.3 & 4.6
Accounting Manager 10,000,000 K/1 111,392,004 120,000,000
8,607,996 10,091,436 4.9 & 4.10
Department Manager 8,000,000 K/2 90,938,004 96,000,000 5,061,996 5,882,616 4.12 & 4.13
Employee 5,000,000 TK 58,122,000 60,000,000
1,878,000 1,969,584 4.15 & 4.16
Employee 5,000,000 K/1 58,254,000 60,000,000
1,746,000 1,831,140 4.18 & 4.19
Employee 4,000,000 K/0 46,746,000 48,000,000
1,254,000 1,315,152 4.21 & 4.22
Accountant 6,000,000 TK 69,564,000 72,000,000 2,436,000 2,682,156 4.24 & 4.25
Driver 2,000,000 K/2 23,934,000 24,000,000 66,000 69,036 4.27 & 4.28
Driver 2,000,000 K/2 23,934,000 24,000,000 66,000 69,036 4.27 & 4.28
Total 624,592,008 660,000,000 35,407,992 40,669,824
Discrepancy (Saving) Rp 5,261,832
52
CHAPTER V
CONCLUSION AND RECOMMENDATION
V.1 Conclusion
Currently, the company is using the net method to calculate all employees’ income
tax. The income tax was paid by the company. The reason why the company uses net
method is because the manager and accounting staff lack of knowledge. Since there are
no production activities, all expense including the employee income tax expense will be
capitalized as a pre-operational asset, which is a kind of intangible assets. Under the
Indonesian GAAP, intangible assets are amortizable assets. So in the following years,
the company will amortize the asset and use the straight line method. The amortization
expense by using the straight method is being considered as deductible expense from
tax accounting perspective.
Since in current situation, the company has no production activities, the annual
income is 0; and based on the analysis in chapter IV, by using the net and the gross
method to calculate the amount of employee individual tax payment, we got that the
gross method will pay less employee individual income tax. By using the gross method,
the company will save cash Rp 5,261,832; it is good for the company operation.
We can see that by using the gross method, the company will pay less employee
income tax and less salary payable from Table 4.36 in chapter four.
53
V.2 Recommendation
1. Based on the conclusion, we know that the gross method will lead less employee
individual income tax payment and save cash for the company, so it is better for the
company to shift the net method to gross method in calculating and reporting its
income tax. The gross method should be more favorable for the company in current
situation.
2. The company should train its finance staff, especially, they whose job is related to
tax, for taxation. Buy some accounting books and let the finance staff to learn.
54
Reference
Bookkeeping from http://www.villagevolunteers.org/wp-content/uploads/2011/06/
Basic-Bookkeeping.pdf and http://en.wikipedia.org/wiki/Bookkeeping
Indonesian Tax Facts (2009) from http://rsm.aajassociates.com/download/articles/2009/
Indonesian_Tax_Facts_June_2009.pdf
Indonesian Pocket Tax Book 2011 from http://www.pwc.com/id/en/indonesian-pocket-
tax-book/assets/Indonesian-Poket-Tax-Book_2011.pdf
Individual Personal Income Tax in Indonesia from http://www.expat.or.id/info/individua
lincometaxes.html
Indonesia Tax Review from http://indonesiataxreview.blogspot.com/2010/11/personal-
income-tax-calculation-using_03.html
Recording from http://en.wikipedia.org/wiki/Recording
Rahmat Bastian and Satrya Wijaya Teja (2005). Income Tax In Indonesia. Jakarta: BT
Partnership
Tax law basis from Consolidation of Law of the Republic of Indonesia Number 6 of
1983 Concerning General Provisions and Tax Procedure as lastly amended by law
Number 28 of 2007 and Consolidation of Law of the Republic of Indonesia
Number 7 of 1983 Concerning Income Tax as lastly amended by law Number 36 of
2008;
Taxation and Investment Indonesia 2011 from http://www.deloitte.com/assets/Dcom-
Global/Local%20Assets/Documents/Tax/Taxation%20and%20Investment%20Gu
ides/2011/dttl_tax_guide_2011_Indonesia.pdf
55
Payroll from http://www.principlesofaccounting.com/chapter12/chapter12.html
si抬
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COMPANY’ s CONFIRMATION LETTERHere1v、
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Ye Hongnang
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P⒒ Lematang Coal Les咖
Palembang,Indone蛀a
Thn Hongliang
008200800053
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“EVALUATION OF TⅡ E NET AND GROss ACCO11NTING METⅡ oD To
CALCULATE TⅡE INCOME TAX PPⅡ 21 IN PT。 LEMATANG CoAL
LEsTARI’’ sh⒑e5Nov,2011 un吐 1 15Nov,2011,and has discussed wIth us the
content ofh吐 s/her Thesis,1nchk旺ng the fI洫gs and1eGoⅡⅡn蛐 tions。
Palembang,201⒈ 1卜 15
PT。 Lematang Coal Lest泛 1JΓi
AGcounung Manager
56
57
RESUME
PERSONAL DETAILS
Name: Tian Hongliang
Current Address: PU Student Housing, Ki Hajar Dewantara Street, Cikarang Baru
Phone: 085814316897,
Email: [email protected]
Place/DoB: Sichuan, China/ Sep 12, 1989
Nationality: Chinese
Gender: Male
EDUCATION
President University, Indonesia 2008.8 – 2012.2
Le Shan Yi Zhong senior high school 2005.8 - 2008.6
EXPERIENCE
December 2009 - February 2010:
I was hired to work as a part time English teacher to teach Chinese women basic
English by Everyday Mandarin.
January 2010 - February 2010
I was the chairman to organize the 2010 Spring Festival Celebration at President
University.
Organized Ping -Pong Club in President University
Private mandarin teacher during 2009
Year 2010 Aug - Oct, work as a journalist under International Daily Group (GUO JI
RI BAO)
2011 JAN - Mar, work as an assistant of finance manager in PT. LCL
2011 Mar - Now, work as the Indonesia Market Supervisor in Nanjing Essence
SKILLS
Able to use Microsoft Office
Proficiency in using Chinese & English; both written and oral. Can use simple
Indonesian language
Able to adapt to new surroundings and learn fast
Able to write simple Chinese poem
ACHIEVEMENTS
Full scholarship at Pesident University
Be independent since 15 years old
58
INTERESTS AND HOBBIES
Communicating
Reading
PERSONAL CHARACTERS
Self-motivated
self-independent
confident
creative
loyal
friendly
honest
strict